NXP Semiconductors (NXPI, Financial) has released its third-quarter earnings report, revealing a downturn in performance and projecting a bleak outlook for the fourth quarter. The company's stock fell by over 5% in after-hours trading following the announcement. NXP's results reflect broader challenges in the semiconductor industry, particularly due to lower-than-expected electric vehicle (EV) production and sales.
In the third quarter, NXP's revenue fell 5.4% year-over-year to $3.25 billion, slightly below analysts' expectation of $3.26 billion. Adjusted earnings per share were $3.45, compared to $3.70 in the prior year and analysts' forecast of $3.42. The automotive chip segment saw revenue of $1.829 billion, a 3% year-over-year decline, while the industrial and Internet of Things (IoT) sector posted $563 million, down 7% year-over-year.
For the fourth quarter, NXP anticipates revenue between $3 billion and $3.2 billion, signaling a potential year-over-year drop of 6% to 12%, against analysts' estimates of $3.36 billion. The company also forecasts adjusted earnings per share of $2.93 to $3.33, compared to analysts' expectation of $3.62. Despite the downturn, NXP returned $564 million to shareholders in the third quarter through dividends and stock buybacks, totaling $2.4 billion in returns over the past year.
The semiconductor sector, especially companies linked to automotive manufacturing, is struggling with inventory surpluses and weak EV demand. Competitors like STMicroelectronics also reported weak results, with a 26.6% year-over-year revenue drop in Q3. Similarly, Texas Instruments noted ongoing inventory challenges in the automotive chip space.
The sluggish global EV market, particularly in Europe and the United States, is a key factor impacting these performances. In the U.S., electric vehicle sales reached a record 1.2 million last year, making up 7.6% of the total automobile market, with projections of 30% to 39% by 2030. However, consumer acceptance has lagged expectations, contributing to a significant rise in inventory levels.
In Europe, the electric vehicle market share has declined, presenting additional challenges for traditional automakers transitioning to electric models. Companies like Volkswagen are facing strategic setbacks, including potential factory closures and significant employee layoffs due to declining sales and profits.
Despite these challenges, the Chinese EV market remains vibrant, with production and sales exceeding 8.3 million units in the first nine months of the year, showing robust growth rates of over 30%. The total annual sales in China's NEV market are expected to reach 12 million units in 2024.
